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The Politics of Europeanization in Europe’s Southeastern Periphery: Slovenian Banks and Breweries on S(c)ale
by Nicole Lindstrom and Dóra Piroska

Many theoretical approaches to Europeanization of EU applicant states portray the process as top-down: governing elites in applicant states conform to EU conditions, constituents provide a permissive consensus, and all applicant states converge toward a single EU model. Such approaches direct less attention to how Europeanization is a dynamic, contradictory, and contestable process. This case study considers how common pressures of Europeanization both constrain and enable domestic politics in particular domestic fields. We focus on two sites of Europeanization in Slovenia: political debates surrounding the restructuring of the Slovenian banking sector and political turmoil over the sale of Slovenian breweries to foreign investors. In both cases domestic societal actors managed to hinder, and in one case halt, the full-scale liberalization and privatization of the Slovenian economy. These actors not only appealed to national interests, namely the preservation of Slovenia’s gradualist or nationalist-capitalist development path; they also framed these political struggles within a larger European political sphere.

“Slovenia: the Sunny Side of the Alps.” This Slovenian tourist bureau slogan is designed to attract potential visitors to this overlooked small country tucked in Europe’s southeastern periphery. Slovenia suffers a similar level of neglect in academic literature on Central and East European EU applicant states. Whereas many studies examine processes of transition and Europeanization in Poland, Hungary, and the Czech Republic, scholars have devoted relatively little attention to Slovenia. This case study seeks to address this omission. The “sunny side of the Alps” might also be read as a reversal of standard representations in which the West European “core” is presented as the only light to which all peripheral European states should follow. Various approaches to Europeanization portray the process as top-down: governing elites of applicant states adapt to EU conditions, their constituents provide a permissive consensus on all matters related to the EU, and every applicant state ultimately converges towards a common set of EU norms and regulations. Such approaches often neglect to consider, however, the ways in which Europeanization intersects with particular political configurations and historical institutional legacies within different applicant states. Viewing Europeanization as a dynamic, contradictory and ultimately contestable process, we seek to show how Europeanization both constrains and enables politics in applicant states. In this case study we show that while the Slovenian government met most EU demands in the negotiation process, domestic pressures hindered, and some cases blocked, full-scale liberalization and privatization of the Slovenian economy.

The paper is divided into three sections. The first section provides an overview of competing theoretical approaches to understanding Europeanization of Central and East European applicant states. We suggest that instead of viewing the process as strictly “top-down,” we must investigate the ways in which the common pressures and constraints of Europeanization are processed, mediated, and contested in particular national contexts. In the second section, we focus on two “sites of Europeanization” in Slovenia: an important step in the restructuring of the Slovenian banking sector and a recent political turmoil around the privatization of a local Slovenian brewery. We show how different groups of domestic societal actors – including economic experts, political parties, media and public opinion – blocked the Slovenian government’s attempts to open banking and breweries to a certain type of foreign competition. We conclude by suggesting ways in which theories and empirical accounts of Europeanization must consider how the process challenges and reinforces national models and practices to different degrees and in divergent ways. Incorporating a broader range of actors in analyses of Europeanization can lead to a more substantive understanding of ongoing transformations on both the national level and within an enlarging EU.

Europeanization of the Eastern Periphery
In recent years European studies scholars, dissatisfied with the findings of conventional Europeanization literature, have renewed interest in modern dependency theory. Rethinking dependency theory in a European Union context involves structuralist and innovative historical revisions. Such analyses challenge the notion that one can apply theories conceived in the context of EU core member states to understand the unique dynamics of Europeanization in peripheral applicant states. Given the asymmetrical political relationship between the EU core and its eastern periphery, in addition to a wide economic development gap, these theorists call for more structural understanding of this process. Some current re-conceptualizations of core–periphery relations also incorporate institutional and agency oriented views into traditional structuralist frameworks (see van Apeldoorn 2001; Bohle 2002). In the following section we first briefly examine a number of these arguments and offer two points of consideration.

A number of theorists highlight the asymmetrical nature of the accession negotiation process (Böröcz 2000; 2001). This view stands in contrast to the common portrayal of accession negotiations as a basic bilateral framework in which two symmetrical entities – the European Commission and applicant state negotiation teams – face each other in free patterns of communication. For one, these approaches highlight the structural asymmetry in negotiations, whereby EU applicants cannot seek various opt-outs already negotiated by many current member states in the areas of foreign, monetary, social or border related policies (Zielonka and Mair 2002: 3). Rather than allowing constituents in applicant states to adjudicate between competing claims to the good, the accession process collapses these options into one, non-negotiable set of procedures – a “take it or leave it” proposition. Moreover, while actors in EU states can lobby the EU on multiple levels (c.f. Marks, Hooghe, and Blank 1996), negotiations between applicant states and Brussels are conducted almost solely between state executive bodies and the European Commission. Until these states are granted official membership in the European Union, therefore, most constituents are effectively excluded from participating in the decision-making processes that shape every realm of their societies. This apparent double standard – of the Commission fostering a democratically unaccountable process that makes democracy a central precondition – is not lost on many critics.

Other views suggest that the literature on “conditionality” – conceived largely in terms of structural adjustment demands placed on developing states – might be more relevant to eastern enlargement than theories based on the notion of “adaptability,” which implies a certain degree of autonomy (Smith 1997; Grabbe 1999). Once applicant states enter formal negotiations with the EU, the relationship between the EU and applicants changes from one of indirect influence to direct leverage (Rupnik 2000). Moreover, some applicant countries are required to meet stricter standards than those imposed on current member states. Competition policy serves as a notable example (see Estrin and Holmes 1998). Thus according to these critics, Central and East European states’ aspiration to join the EU has resulted in an asymmetrical and dependent relationship that calls for comparisons with other “developing states” rather than with states in the developed European core (Jacoby 2002).

In order to highlight the asymmetrical relationship between the EU core and its East European periphery, most analysts tend to portray Europeanization as a strictly top-down process in which applicant states passively receive and implement EU mandates. Bohle (2002) expands this line of critique by introducing a theoretical framework that allows for an analysis of the changes in the underlying rationales of actors in both EU and applicant states. According to Bohle, the coherent strategy of integrating the CEE countries economically is motivated by an overarching project of neo-liberal restructuring at the EU level. Exporting a more radical market variant of neo-liberalism to applicant states, without extending more inclusionist or re-distributive features of the European project, serves the interests of those actors who seek to capitalize on differences in social and wage standards. Moreover, Europeanization also serves the interests of elites in applicant states who seek to secure external rationales for economic restructuring and to solidify transnational economic ties and political influence. Thus, while Bohle perceives the impact of the EU on the applicant states as a constraint in applicant state development, she also acknowledges that the enlargement process has a feedback effect by redefining these very constraints, namely a neo-liberal restructuring of the EU polity. By considering the interests and actions of the actors involved – the elites of the applicant states as well as the core countries – she thereby augments structuralist accounts of the Europeanization of the Eastern periphery.

These various structuralist analyses of the European accession process have considerable analytical and political appeal. They show how structured relations of social power permeate the process of Europeanization, and how these relations of social power have significant consequences for political life and the reproduction of social life as a whole. Yet the overriding emphasis on the “top-down” impact of Europeanization on domestic institutions and policy-making often obscures that social power relations are always dynamic, contradictory, and contestable processes. We argue that structuralist accounts of Europeanization might be augmented in the following ways. First, Europeanization indeed delimits the context and structures in which applicant states’ policies on Europe are directed and legitimated. However, by conceiving Europeanization in terms of discourse and practice, one must consider how the process both constrains and enables actors, and interactions between these actors, in particular domestic fields (Bourdieu 1991; Leander 2001). Moreover, while scholars such as Bohle (2002) examine how certain political and economic elites propel the process of Europeanization forward in these states, fewer scholars seek to uncover competing political projects within these dominant ones. By placing more emphasis on these marginal positions, we seek to highlight the political struggles over European norms and structures, a perspective largely absent in the burgeoning literature on EU enlargement to Central and East European applicant states.

Second, by conceptualizing Europeanization as historically contingent and locally bound processes we examine how common pressures impinge upon, challenge or reinforce national policies and practices to different degrees and in divergent ways. Asymmetrical economic and political relations between the EU and the candidate states undoubtedly shape the terms of the EU accession process. The EU enlargement process constitutes an important factor in forcing adaptation – through conditionality, engineering and crafting – towards a neo-liberal regulatory framework, both in EU applicant states and the EU as a whole. Yet this push towards policy convergence does not necessarily push states in a common political direction (Zielonka and Mair 2002: 2). The Europeanization process varies in different functional areas, interacts differently with other unifying factors (such as Americanization or globalization), and intersects with various centrifugal forces within states – all leading to different institutional configurations and domestic political struggles. Moreover, the evolution of the EU has always involved inter-state and intra-state political struggles, subject to both the particular dynamics and logic of domestic politics (Héritier 2001: 2) and transnational and supranational forces. Thus political struggles within applicant states over the terms and understanding of Europeanization could be viewed as evidence of the gradual emergence of European politics as usual.

In the following case study we thus draw attention to the actors and stakeholders who sought to renegotiate politically the structural and normative constraints of Europeanization. We suggest that the actual development of capitalism in Slovenia, like in other Central and East European states, did not simply entail strict structural adaptation to EU norms. The process was also dependent on the interactions of various agents, historical legacies, and institutions. By expanding the notion of Europeanization to include a wider political field, we challenge the common portrayal of Central and Eastern European elites – and citizens – as passive participants in the process of Europeanization. Instead we examine how they are actively involved in shaping and contesting this process.

The Slovenian way: A gradualist path to Europe
The “return to Europe” was a prominent rhetorical devise in Slovenia movement for self-determination, epitomized by the 1990 Demos coalition’s campaign slogan “Europe Now!” (Evropa zdaj!). Since 1990 Slovenian has pursued two simultaneous goals: transition and Europeanization. Most authors suggest that these two processes worked in tandem in most CEE states, with Europeanization perpetuating and solidifying free-market and democratic reforms already underway in these states. We show through the Slovenian case that Europeanization, if only viewed as process of strict adaptation to pre-established norms and rules, presents a paradox. Arguments for a “top-down” understanding of Europeanization mainly focus on three mechanisms. First, implementing all laws laid out in the 31 chapters of the acquis. Second, meeting the three Copenhagen Criteria for accession. Third, analysts such as van Appeldorn, Bieler, Bohle and others also emphasize the role of private investors in pressuring both the EU and applicant states to open their markets to investment. Such a view directs our attention to the decisions and policies of ruling governments and formal authorities. Indeed, throughout the 1990s Slovenian authorities actively prepared for membership in an economic union that clearly prioritizes (but often fails to achieve) free access of all parties to member states’ economies. However, Slovenian authorities simultaneously sought to protect their internal market through mechanisms that were outside the official channels of EU accession. Although the public also supports the overall goal of EU membership certain cases mobilized various actors to shape the terms of this process. Privatization provides an ideal case in which to understand the various facets of Europeanization.

If we expand our understanding of Europeanization to include the impact of Europeanization on the public sphere broadly conceived, such competing trends might appear less of a paradox and more of a case of European politics as usual. In the following section we examine two such sites of Europeanization: public debates and struggles over the privatization and sale of banks and breweries. We seek to show how two transactions, which pointed towards a greater involvement of European firms in the Slovene economy, took on a heightened political significance in the Slovenian public sphere. Economic experts, political parties, the media, and the public coalesced around the issue to contest the perceived threat that Europeanization posed to Slovenia’s unique gradualist and national-capitalist development path.

Case Study I: Opposition to the Privatization of Nova Kreditna Banka Maribor
In 2001, the Slovenian banking sector was undergoing the most significant property changes since Slovenia gained independence a decade earlier. The privatization process of the two major state-owned banks, Nova Ljubljanska Banka (NLB) and Nova Kreditna Banka Maribor (NKBM), coincided with the process of selling two private banks: Banka Koper from the Italian border region and Krekova Banka, once the catholic church’s saving institution. In the previous year Société Général took over Slovenia’s largest private bank, SKB Banka, with a 10.3 percent market share. As foreign presence was hitherto rather low and the Slovenian economic policy was marked by a solid gradualism, sudden property changes attracted a considerable degree of public attention and mobilization. Although property changes in banking sector was a major concern in most CEE countries, in Slovenia a joint media campaign, public protest and political opposition brought a halt to the privatization of Slovenia’s second largest bank.

In this section we will analyze the nature of this public resistance to bank privatization. We proceed by describing the actions of three groups of societal actors in this debate. First, we show how economic experts’ informed public debate not only in relation to foreign investment into the Slovenian banking sector, but regarding Slovenia’s unique developmental path more generally. Second, we describe the struggle among political parties for influence over bank privatization that occurred within and outside formal parliamentary channels. Third, we suggest how public debates around bank privatization shaped, and were shaped by, public opinion polls and the media.

On 30 May 2001, the Slovenian Government adopted a privatization plan for the Nova Kreditna Banka Maribor (NKBM) and Nova Ljubljanska Banka (NLB). The NKBM privatization program called for the reduction of the state owned share in the bank from the current 90 percent to 25 percent plus one share, with 65 percent minus one share being sold to a foreign strategic investor (Slovenian Business Week 2001a). After the plan was adopted the government elected a commission supervising the sale of NKBM responsible 6 for making an independent assessment of the bids. At the same time, the government retained the right to make the final decision.

The European Commission, in its regular reports on Slovenia’s progress towards meeting accession criteria, has repeatedly raised the slow pace of bank privatization as a main concern. The Commission cites bank privatization as evidence more generally of the “gradualist approach to structural reforms in Slovenia” (European Commission 2003: 36). In its general evaluation of economic criteria in the 2001 report, the Commission cited the May 2001 privatization decision as an “important step forward” in reducing the role of the sate in the economy. The Commission reported that while “restructuring of the banking sector has progressed somewhat,” they cautioned that “further work remains” (Commission 2000: 30). More specifically, the Commission warned that the intention of the state to keep a blocking minority share in the banks would diminish the interest of potential key investors. In the 2003 “Comprehensive Monitoring Report on Slovenia’s Preparations for Membership the European Commission” concludes: “Although limited and partial privatization is taken place in the banking sector, the state remains strongly present in this sector while further privatization would promote reform conducive to competitiveness” (authors’ emphasis, European Commission 2003: 8).

On 16 July 2001 the Finance Minister invited leading financial institutions to express their interest, first preliminary and non-biding offers followed by biding offers. The European Commission’s warnings seemed to be vindicated (Slovenian Business Week 2001b). To the great surprise of Slovenian government officials, who predicted they would receive at least 26 offers, only six financial institutions replied to the Ministry’s call for a show of interest. Moreover, out of these six offers only three met the minimal requirements to be taken seriously as biding offers. The three invited institutions were Italian bank Unicredito, Austrian Bank Austria and Activa Group (a Slovenian company heading a consortium of Slovenian and foreign financial institutions comprising Isralel’s Ganden Group, Slovenia’s Factor Banka and European Privatization and Investment Corporation) (Slovenian Business Week 2001c). Government representatives stated publicly their disappointment that no “major” bank expressed interest in NKBM. In October 2001, Finance Minister Anton Rop reported that the offers received for the NKBM are too low and would have to be raised during the negotiations phase or otherwise the privatization process would be brought to a halt. NKBM’s privatization began to slip behind schedule. The commission supervising the privatization of NKBM asked all institutions that placed bids to provide additional clarifications and soon after entered talks with all three bidders.

The initiation of formal talks spurred vociferous public debate surrounding the NKBM privatization. In late October the Maribor based “Movement for People” sent a public letter to Finance Minister Rop arguing that the sale of NKBM would not be profitable and could have negative effects. The mantra “Our Bank” became an epical topos in relation to NKBM. The letter was followed by a well publicized political and media campaign against the sale of NKBM, with the greatest amount of activity in the Maribor region (Slovenian Business Week 2001d). In early November 2001 one of the most influential daily newspaper published a telephone based public opinion polls showing the generally ambivalent attitude of the Slovenian public towards privatization to foreigners, which we discuss in greater length below.

In January and February 2002, negotiations were further prolonged (Slovenian Business Week 2002d). According to the chair of the supervisory commission, Darko Tolar, the prolongation was an attempt to wait and see what the governing parties decided, until 22 March 2002. The commission supervising the sale evaluated two major aspects of the offers: their actual price offer and the future plan for the bank.among themselves in relation to privatization. The commission decided to wait until the central bank made a decision in relation to the cases of SanPaolo IMI’s attempt to take over Banka Koper and Raiffesen Zentralbank’s effort to buy Krekova Banka (Slovenian Business Week 2002a). Both of these foreign takeovers had already prompted heated debates in the Slovenian public sphere. Bidders were asked to prolong the validity of the biding offers, which expired on February 8th. According to these two criteria the best offer came from Unicredito. Bank Austria scored second and Activa Group third. It is also telling that the future plan of Activa Group seemed the most attractive to the commission, as unlike the two other bidders they would have maintained the independence of NKBM and increased its activity in the Balkan region.

In the end of March 2002, almost a year after the privatization program was announced the commission decided that none of the bidders that submitted biding bids met the privatization conditions (Slovenian Business Week 2002). After examining all elements of the privatization process, the Ministry of Finance made a decision to temporarily put a halt on the procedure. Representatives of BACA expressed surprise about the decision, noting that during negotiations nobody had informed BACA that its offer was not in line with the privatization conditions. Meanwhile, unofficial information that the sale would not go ahead had been circulating in Slovenian media in the previous weeks before the announcement. According to the media the final decision to block privatization was taken at the highest level during a meeting between Prime Minister Drnovsek and Finance Minister Rop held on 18 March. However, already on the 14 March President Kucan told the Financial Times that this was not the best time to sell banks to foreign investors, as the supply of banks for sale exceeded demands, and expressed doubts on the need to sell Slovenian banks to foreigners (Slovenian Business Week 2002f).

The European Commission in its 2002 regular reported positively that bank privatization had started but “not without problems,” citing the government’s decision to stop the privatization of NKBM and halted the other in “the final stages of the process” due to increased “political resistance” (Commission 2002: 31). In its general evaluation of Slovenia’s progress in meeting economic criteria, the Commission stated that the “competitiveness of the economy would be supported by speeding up structural reforms.” In particular, the Commission cited “further privatization in the financial sector” and the “final liquidation of the Slovenian Development Corporation” as two main goals to be achieved by the close of accession negotiations (European Commission 2002: 23).

Debating foreign presence: economic experts, public opinion and political parties
The decision of the government to block privatization may be understood within various frameworks. For more structuralist-oriented analysts, the decision might be viewed as an exception to the understanding of Europeanization as an external force that pushes CEE governments to unilaterally open up their markets. Against this view we suggest to understand the decision of the government in light of the ideas that were circulating in the early 2000s. In this way we can see the numerous internal reference to EU and the definition of the Slovenian national interest within the enlarged European economic and political arena. Europeanization emerges as an internal process that reorganizes the domestic public sphere.

This reorganization proceeds in three ways. First, from the part of the governing parties there is a tendency to legitimize their actions as a prerequisite to the European Union membership. With this move they seek to shift the source of legitimacy from the domestic realm to the external realm, and from popular legitimacy to institutional legitimacy. This strategy has been used less frequently in Slovenia compared to other applicant states, perhaps attributable to the significant party cleavages within ruling coalitions. Second, we observe that along with changing the source of legitimacy the Slovenian government also engages in double talk with its European private and public partners and with the Slovenian public itself. The government interprets its action according to the exigencies of its intended audience. These two trends weaken political accountability of the governments to the public and shifts power from the public to narrower political circles. Finally, that the issue of privatizing banks became a heated political debate shows that in the context of the ongoing European integration of Slovenia the public becomes more sensitive to particular issues. The public resisted attempts to discuss privatization solely according to its economic aspects (financial costs and benefits) and treated the issue as a larger question of Slovenian national interest. This process can be viewed as attempt on the part of the public to countervail the first two trends and try to increase responsiveness of governing parties.

In order to highlight these aspects of the reconfiguration of politics in Slovenia first we look at the economic experts arguments that were presented not only in scientific conferences but also regularly quoted in the media as well. Second, we provide a short overview of the result of the public opinion polls conducted at the heyday of the political turmoil. Finally, we show the political parties struggles as the site of mediation between competing interests:

1. The economic experts’ arguments
Economic experts from the Faculty of Law were since long involved in the political debates regarding the role of Central Bank, monetary policy and bank ownership in the Slovenian public sphere. Prominent figures such as Ivan Ribnikar, professor of economics at the University of Ljubljana, or Joze Mencinger, former Minister of Economy, fulfilled important positions as the members of the Board of the Bank of Slovenia. They also regularly contributed opinions and analyses in the Slovenian public media. The media were motivated by the political turmoil surrounding bank privatization in Slovenia throughout 2001 and 2002. They were concerned with the issue of selling the state-owned banks to foreigners and they argued that the government’s aim of increasing private participation in banking and thus meeting the Copenhagen criteria could be met via privatization to domestic investors. The thrust of the argument was twofold. On the one hand, they analyzed the structure of ownership in Western and Eastern European market-economies and underlined the marked differences between the two regions. On the other hand, they highlighted the monetary consequences for small economies of opening markets fully to foreigners.

The first line of argument presented by economic experts was that compared to EU banking sectors, foreign presence and penetration in CEE banking sectors is extremely high. They argued that in some EU countries, the share of foreign banks in total assets is rather small (3.3 percent in Austria and 4.3 in Germany in 1997), while the Euro area average in 1997 was 12.7 percent, much lower than the CEE average. They attributed the high foreign presence in other CEE countries to insufficient domestic capital, lack of expertise and deficient technology. To support their argument, they presented data that clearly showed divergence in the banking sectors in terms of foreign presence and state involvement between EU and CEE countries (see Figures 1 and 2 below). Moreover, they argued that Slovenia has been an exception because it had a relatively better developed banking sector at the beginning of transition and had rehabilitated banks with domestic resources. Through the 1990s, Slovenia opened up to foreign banks only gradually. Still, they assured, among CEE countries, Slovenia’s banking sector is one of the most stable and most developed in terms of products offered.

Figure 1: Share of foreign bank branches and subsidiaries in EU countries (% of total assets, 1997)

Source: ECB (1999) cited in Moore, D. and Zajc, P. (2000: 10).

Figure 2: Share of foreign banks in CEE countries (% of total assets, 2000)

Source: National central banks, EBRD (1998) cited in Moore, D. and Zajc, P. (2000: 10).

The second argument against selling banks concerned the monetary effects that large capital inflow would potentially cause in a small open economy. Namely they argued that it would have adverse effects on the exchange rate and would thus increase the cost of Slovenian exports. A recent quote by former Minister of Economy and leading Slovenian economist Jože Mencinger suggests how influential economic experts portray foreign investments. We quote Mencinger at length (Panic 2002: 102):
" The demands by foreigners for an end to the Slovenian ‘national-capitalism’ are increasing, although I think that we have the right to defend our interest and our capitalism, since others also have that right. … [I]t is at least useful that foreigners have realized that here enterprises can not be bought cheaply. As far as banks are concerned I don’t know why the government is in a hurry right now to privatize the banks and sell them to foreigners. The inflow of currency would cause a greater pressure on the appreciation of [Slovenian] tolar. It is probably not accidental that the majority of banks in Western Europe are predominantly in domestic ownership, while in Eastern Europe it is in foreign ownership. Banking is not something we would not know how to do ourselves. There is no proof that foreign banks are more effective than the domestic ones. Not only that, studies…show that at least in Slovenia the things are the reverse: foreign banks do not behave differently from domestic ones, they are only more successful in avoiding paying the income tax."

2. Political parties and parliamentary debates over bank privatization
Slovenian political parties have long fought for influence over the issue of privatizing state-owned banks. The final phase of the bank rehabilitation process was marked by consent between the two most influential members of the governing coalition. This agreement resulted in the division of the demanding task of supervising the two largest state banks. In 1997, the government, like today, consisted of four independent political parties. However, only the two largest parties, the Liberal Democrats of Slovenia (LDS) and the Slovenian People’s Party (SLS), gained substantial influence over the banks. In 1997, LDS was granted the right to nominate representatives to the supervisory board of NLB and SLS to the NKBM.
The conclusion of the bank rehabilitation program was announced once this supervisory body was established.

Once Slovenia signed the European Agreement in 1997, the Government quickly engaged in amending the Slovenian legal framework to adopt the aquis communautaire. The Government started to substantially liberalize the banking sector and to dismantle many of the barriers to entry that were kept in force throughout the 1990s. They also began negotiations regarding the privatization of the banks. With the new Banking Law of 1999, substantial changes were evident in the opening up of the Slovenian financial system. Since 1999, foreign banks have been permitted to open branches in Slovenia. The different treatments of domestic and foreign investors acquiring an ownership share in a domestic bank have also been abolished. The new law also abolished the inter-bank agreement on the maximum deposit interest rates. New banking groups were formed and the privatization of NLB and NKBM began.

With the start of the privatization program controversies ensued between the Prime Minister and the parliament namely over who could make final decisions over bank privatization. Janez Jansa, leader of the main opposition Social Democratic Party and former President of the National Assembly, fought for the legislative branch to play the major role. Due his weakening popularity he did not manage to push through a law in the Slovenian parliament regarding privatization. Thus in Slovenia, unlike in most CEE countries, no bank privatization law was passed by the parliament.7 This resulted in the Prime Minister’s office being granted greater freedom in terms of planning and execution of bank privatization. It also contributed to limiting public transparency of the issue. As decision-making shifted to the executive branch, controversies and competing views continued within and between governing coalition parties regarding privatization that now had to be reconciled outside formal parliamentary channels.

The major governing party, LDS, has been a strong supporter of bank privatization for various reasons. First, Slovenian Prime Minister Janez Drnovsek and his ministers have been enthusiastic supporters of European integration. They have dutifully fulfilled the EU’s formal and informal requirements to gain EU membership. Second, Finance Minister Anton Rop was concerned with the level of public debt Slovenia once contracted with various banks to cover the cost of the bank rehabilitation process. He hoped to gain revenue from quick bank privatization to finance the outstanding public debt. However, between 1998 and 2001 LDS was constrained in its pursuit of bank privatization by members of its coalition governments. Marjan Podobnik, president of SLS, was generally opposed to selling banks to foreigners. Podobnik advocated a plan that would have split the major banks into small regional units (ironically a common tactic of Yugoslav politicians in the past).8 According to this plan, originally conceived by a prominent opposition leader Andrej Bajuk, president of the New Slovenia party, the head of the banks would stay in Ljubljana while local political representatives would supervise smaller units. While SLS was willing to accept the privatization of NKBM, they opposed the privatization of Nova Ljubljanska Banka, Slovenia largest and most important bank.

The LDS-led coalition also met continued opposition to their bank privatization plan from other opposition parties. The United List of Social Democrats (or ZLDS), the former League of Communists, advocated that both banks should be kept in state hands until domestic investors could purchase a governing share. Although a junior partner in the government, ZDLS has major influence in the Maribor region. The Mayor of Maribor, a ZDLS elected official who holds significant influence as the leader of the second largest city in Slovenia, is an ardent and outspoken opponent of NKBM’s privatization.

In sum, one must consider the role that political parties played in the process leading up to the final decision by Prime Minister Drnovsek and Finance Minister Rop to block privatization on18 March 2002. The privatization plan was in line with the suggestion of the privatization supervising committee. The strong political involvement in the issue by left- and right-leaning parties within and outside the governing coalition suggests the difficulty of the commission to make an independent decision about the privatization of the NKBM based solely on economic criteria. The victory of the coalition of the Slovenian People’s Party and the Slovenian Christian Democrats in the April 2000 parliamentary elections interrupted the LDS’s lock on power since 1992. While LDS quickly regained political power in the October 2000 elections, right-leaning parties are now more united in opposition towards the government. Increasingly these parties – such as Bajuk’s New Slovenia Party – are introducing more overt euro-skeptical and euro-critical arguments into parliamentary and public debate.

3. Media and Public Opinion
The issue of bank privatization was hotly debated in the Slovenian media, particularly around the sale of Nova Kreditna Banka Maribor. The media tended to be critical towards or outright oppose quick privatization and sale of banks to foreign owners. The financial daily Finance was one of the only periodicals to argue strongly in favor of these policies. They utilized many of the common arguments in favor of privatization of banks to foreigners, such as increased expertise and technology, the possibility of integration into international financial networks, as well as sound financial backing. Critical perspectives were much more ubiquitous in the Slovenian media.

Critiques of the rapid privatization and sale of banks centered on a number of arguments. First, the media often framed the issue in terms of preserving national autonomy and protecting national interests. Many media accounts highlighted Slovenia’s unique capability of relying on its own resources and capital to build a strong national economy. They also suggested that selling national assets to foreigners would threaten the existence of the Slovenian nation. Such arguments were often made in the context of European integration, whereby the influence of small states like Slovenia were said to be constantly threatened by the increased power of larger and more affluent EU member states. Second, the media focused on the strategic importance of banks to the autonomous development of the Slovenian economy. Critics suggested that selling banks to foreigners threatened to reduce the existing influence of these banks in supporting Slovenian companies. Finally, commentators argued that increased foreign influence in the banking sector would also bring about a corresponding rise in political influence. Foreign owners would begin to finance political parties either directly or indirectly, thereby gaining influence in national level decision-making.

Critical views towards quick privatization and sale of banks to foreigners are also reflected in public opinion polls. Public opinion distinctively identifies with Slovenian banks, which are believed to be the pillar of its economic system. Numerous public opinion polls show that the public believes that Slovenian capital should be defended. In a poll conducted in November 2001, which coincided with the public campaign against the sale of NKBM to the highest bidder, an overwhelming majority of respondents expressed opposition to the privatization of banks, as summarized in Figure 3. In the same survey, however, when asked whether they believed it was feasible for NLB and NKBM to remain in Slovenian ownership in the long run, a majority (47.7 percent) reported that they believed there was high possibility that Slovenian buyers would eventually sell the banks. Slightly over 26 percent of respondents remained optimistic that the banks could remain in Slovenian hands.

Figure 3: What is your opinion regarding privatizing Slovenian banks?

Source: Delo Stik, 8 November 2001, n = 706

In another survey conducted in November 2001, respondents were asked whether and how the type of ownership (domestic or foreign) would have an impact on their personal banking decisions. When asked whether they would keep their savings in a bank that came into foreign ownership, 45.1 percent of respondents reported that they would transfer their savings to Slovenian banks, 35.4 would keep their savings in the bank, and 19.5 were undecided on the issue. Yet when asked what factor they considered most important in their decision to deposit money in a particular bank, only 6.5 percent of respondents said the ownership of the bank was a major factor.

Asked what they believed the government should do to galvanize larger bidders to invest in state owned banks in Slovenia, the largest percentage of respondents (43.5 percent) said that the state should retain ownership for a longer period of time. Approximately 35 percent said that the government should sell to Slovenian buyers, depending on their capital, while only 8.6 percent said that the state should sell the foreigners. When asked to give reasons for the biggest disadvantage of foreign banks over Slovenian ones, respondents expressed both practical and larger political concerns (see Figure 4).

Figure 4: “What is the biggest disadvantage of foreign ownership of banks?”

Source: Delo Stik, 8 November 2001, n = 706

That a majority of respondents suggested that the main disadvantage of foreign ownership of banks was the political implications, rather than more practical concerns such as the cost of services or interest rates, suggests that the arguments offered by the media had some impact on public opinion.

Case study II: The Battle of the Local and Foreign Brewers
This ambivalence towards privatization and opening markets has been most evident in the banking sector. We suggest that this ambivalence towards opening to foreign investors, also visible in other sectors, might be better understood in the broader context of Europeanization. The battle between the Belgian based Interbrew and the Slovenian brewer Pivovarna Lasko over the takeover of the Ljubljana-based Pivovarna Union brewery was framed by local actors has a battle between David and Goliath: between a large EU-based conglomerate and a small, Slovenian “national” brewery. This public “battle” – involving a state agency, foreign investors, the media, political parties, and local breweries, in which the local investors prevailed – was notably fought during the most intensive stages of final EU accession negotiations. This case highlights how contentious public debate over opening the Slovenian market occurs and is often framed within the context of Europeanization.

The Slovenian beer market has long been dominated by two popular local brands: the Ljubljana-based Union brand, favored among Ljubljana connoisseurs, and the Maribor-based Lasko, the favored brand outside of the capital. The rivalry between the two brands involved more than a question of taste in beers; it is a matter of regional and national pride. In November 2001 the Belgian based brewing company Interbrew entered a bidding war with Lasko for controlling shares in Union. Interbrew is well established in other parts of Central and Eastern Europe, having purchased local breweries in Bulgaria, the Czech Republic, Hungary, Romania, and elsewhere. Interbrew’s entry into other Central European markets undoubtedly raised little public attention. Yet in Slovenia the proposed takeover prompted a heated public debate. The so-called “brewers’ war” raised larger questions in Slovenia of whether privatization should be led by domestic or foreign capital, culminating in a panel debate on the subject broadcast on national Slovenian television (Bandelj 2003).

The takeover battle between Interbrew and Lasko rested in large part on the actions of two proto-governments funds: the Pension Fund Management (KAD) and the Slovenian Reimbursement Company (SOD). Interbrew acquired its 10 percent stake in Union from the KAD in December, thereby gaining 38 percent ownership of the firm. Lasko alleged that Interbrew violated the act on takeovers by upping its offer without issuing a new public offer, a claim that was eventually dismissed by the Slovenian Securities Market Agency. Lasko, which owns just under a quarter of Union shares but is believed to control over half of Union indirectly, then proceeded to obtain a 12 percent share previously owned by the SOD. The sale turned out to be a one-man move by the SOD director, who was later ousted from his post by the SOD supervisory board. Responding to charges filed by Interbrew, in December 2001 the Ljubljana District Court interdicted Lasko from freely using the 12 percent share acquired by the SOD, maintaining that the SOD had single-handedly signed the contract on the sale of SOD shares and had thus abused office. The District Court also temporarily banned Lasko from purchasing further shares. The High Court overturned these District Court rulings in February, thus allowing Lasko to wage another takeover battle. At the same time the Slovenian Competition Protection Office launched proceedings against Lasko for violating the anti-trust legislation, following a complaint filed by Interbrew.

While the battle between Interbrew and Lasko was being waged in court, a heated public debate ensued over foreign versus domestic ownership. A multi-party coalition of over 30 members of the Slovenian Parliament petitioned to convene an emergency parliamentary session of the sale of Union to Interbrew. The campaign, led by Slovenian National Party Chairman Zmago Jelincic, argued that it was in Slovenia’s national interest to keep its best and most competitive companies in Slovenian hands. Moreover, they called on the government to dismiss the chairman of the KAD for selling its stake to Interbrew, alleging that Interbrew “prearranged the deal and put Lasko in an unequal position” (Slovenia Business Week 2002a). Borut Korun, leader of the Eurosceptic NGO called the December 23 Movement, argued that foreign investors come to Slovenia merely for profit and that EU members skillfully use the relative poverty of the countries of the former Eastern bloc to their advantage (Slovenia Business Week 2000c). (The story of the battle between Interbrew and Lasko over the control of the Union brewery may be read as a classic tale of David and Goliath. Yet it is important to note that Lasko has pursued an aggressive strategy to expand its market in Southeastern Europe. It bought Jadranska brewery in Split, Croatia in 2000 and is currently in the process of fighting Interbrew for control of a spate of privatizations going on in Serbia and one in Bosnia for the Banjalucka Brewery. “[Interbrew] can spend more, of course, than we can spend,” says an adviser to Lasko's managing director. “But we know the market . . . the mentality, the language” (Heaps 2002). See Jaklic and Svetlicic (2003) for an expanded discussion of Slovenia’s enhanced transition through outward internationalization to the Balkan markets.)

European officials also weighed in on the debate. An EU official commented on the disputes by stating that “foreign direct investment is undoubtedly positive for Slovenia’s integration into the European economic arena” (Slovenia Business Week 2000b). Spain’s Ambassador to Slovenia remarked that Slovenia must “find a balance between strengthening its own identity and opening outwards” (ibid.) Slovenian Prime Minister Janez Drnovsek was prompted to comment on the battle in a January press conference, remarking that “Slovenia’s national interest is not protected by domestic ownership. The national interest is job, high-quality products and a high standard of living” (Slovenian Business Week 2000a). He went on to say that the government did not take sides in the battle, stating that: “through its institutions, the state only wants to assure that the procedure is transparent and that the rules of the game that we have adopted are observed” (ibid.).

In sum, understanding these two cases as part and parcel of Europeanization may not be evident. Yet we argue that the many facets to be incorporated into the analysis of the Europeanizing Slovenian political and economic fields. Both the restructuring of the Slovenian banking system and the “brewers’ war” were fought over underlying conceptions of the Slovenian market economy, namely over what counts as European practice and how Slovenian national interests should be defined within a larger European sphere. The cases also illuminate the politicization of economic issues, a marker of the redefinition of traditional political struggles. The cases highlight the increasingly prevalent role of numerous actors outside the state in domestic political debates, actors that in a conventional view would not account as strictly “political” such as NGOs, media, European officials, business actors from Slovenia and abroad. The cases thus suggests that scholars must consider the roles of larger range of actors active both in and across public and the political spheres.

We are witnessing today an apparent convergence at the level of the institutional development of Slovenian capitalism to that of the EU member states. Indeed, the Slovenian government has complied with all outstanding EU requirements, unilaterally agreeing to privatize the banking sector and opening the economy more generally towards greater flows of FDI from the EU. Yet by focusing solely on this outcome scholars fail to consider how the process of Europeanization operates not only in the course of institutional adaptation, but also involves the processes of public contestation. Viewing the dynamics of Europeanization with regard to both processes, and the interactions between the two, allows us to see beyond the general concerns of European studies scholars, namely to what extent do we find converging patterns in institutions and structures. It creates room for assessing the nature of the changing politics that incorporates a broader range of actors and issues from the domestic and larger European public sphere. Moreover, methodologically it requires us to augment top-down approaches to Europeanization by emphasize locally bound discursive constructions and political struggles. We do so in this paper via the examination of two ‘sites’ of Europeanization, the restructuring of the Slovenian banking sector and the recent battle between local and foreign breweries.

We share Slavoj Žižek’s (1999) cautious optimism that by being forced to live out and sustain the competing and often contradictory demands of the national and transnational, Central and East European actors are placed in a privileged position to invent creative ways out of this dilemma. We suggest that Slovenian societal actors have explored one possibility. By promoting a more gradualist nationalist-capitalist pathway to Europe from the periphery, these actors contest the neo-liberal logic that sees no alternative for Central and East European countries. Recognizing such possibilities, however, requires that we rethink the nature of European accession as it now stands. Core-periphery analyses of Europeanization tend to present the relationship as a top-down one. By looking only at the structural dimensions of Europeanization we ignore the ways in which local agents become active participants in this process, both at the national level and within an enlarged European political sphere as well. As the EU prepares to integrate ten new members in May 2004, it becomes even more politically and analytically imperative to reconceptualize Europeanization within a broader European political space that will transform the East-West divide.

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Paper abstracted from: "Queen’s Papers on Europeanization No 4/2004"

Nicole Lindstrom
Assistant Professor
International Relations and European Studies
Central European University

Dóra Piroska
Ph.D. Candidate, Junior researcher
Institute of Economics – HAS
Central European University/